of the Great Depression

that started in 1929?

That was a long time ago.

So what's this have to do with you?

Well, no matter what

you're going to do,

you're going to be working

with money.

And it's important

for you to understand

how money works

and how it could stop working.

The lesson you're about to learn

applies to all currencies at all times.

Despite persistent myths,

the Great Depression was not

caused by the stock market crash

or by a failure of markets.

It was caused by a failure

of the Federal Reserve System,

the so-called "lender of last resort."

Created by the U.S. government

in 1913,

the Federal Reserve System

is supposed to prevent

booms and busts

in the overall economy

by providing a sound currency.

In the 1930s they failed in this job.

They did not provide enough

liquidity to banks,

the raw material banks need

to carry on their business.

Managing liquidity correctly

keeps the buying power

of money stable

and keeps banks

from running out of cash.

Imagine if you couldn't

get your money

when you needed it

and the problems that would cause.

I went on this date last Saturday.

Are you serious?

The guy was really cute.

Hi, I’m Carra Cheslin and, like you,

my friends and I would like the world

to be better.

It really bothers us

that when we try to solve a problem,

sometimes the solution

causes even more problems.

Wait guys if we’re gonna

catch the movie

we should probably get going.

It starts in like fifteen minutes.

Oh yeah sure.

Can I just run in and

get some money? I'll be right back.

Yeah. Hurry up.

What? That doesn’t make any sense.

Grandma just gave me

a check last week.

Okay, don’t panic. Try again.

This is gonna take longer

than I thought,

the machine is like not making sense.

Here, lemme see.

Okay.

Has this ever happened to you?

Well, once it happened

to millions of people

and it wasn’t just some

little computer glitch.

It was called the Great Depression…

and well you know about that.

Did you do your pin right?

Millions of people put their money-

their hard earned

savings into the bank.

So imagine the panic that they have

when they tried to withdraw

some of their life savings

and the bank refused them!

What?

And imagine that it happened

not only to you,

but to people all over?

Sound farfetched?

Well, it really happened in the 1930s.

Millions of people were left

with just the money

they had left in their wallets.

But why did all those bank

vaults go empty

and where did all the money go?

So...

what caused the Great Depression?

I have to think. Give me a sec.

I’m not really that sure.

It might have been World War I.

Just the lack of jobs.

It was the stock market crash.

Instability of some sort. Right?

See…no one even mentions

the absence of cash,

which caused a national loss of faith

in our monetary system.

That’s what caused

the Great Depression.

And it didn’t just affect adults.

Did you know that at the height

of the Great Depression,

there were a quarter

of a million teenagers

living on the roads, by themselves,

in America,

and tens of thousands

of kids with their families?

I had no idea. Can you imagine?

Their fathers lost their jobs –

they’d been evicted from their homes.

Even their schools—

thousands of them--

went bankrupt and closed their doors.

How could this

have happened in our country?

Our economic system

hadn’t changed,

so what was it?

Wall Street,

the New York Stock Exchange.

Since it’s kind of

the center of capitalism,

I thought I ought to

come here myself

and see what it’s all about.

Wow! It’s pretty crazy down there….

all the hectic activity.

But now that I’m here,

I see that it’s just an open market

with buyers and sellers -

based on supply and demand -

to the tune of 2 billion shares a day.

Most of us know what happened

here in 1929.

The stock market crashed.

I’ve heard others blame it

on corruption or income inequality,

or even on the

capitalist system itself.

What happened was,

more people wanted to sell

than wanted to buy,

so prices dropped… big time.

But while there are many things

that contributed to

the Great Depression,

there’s another less dramatic,

but just as important reason

that has kind of fallen

through the cracks.

Economists know about it,

but most people don’t.

It has more to do with money

than it does with stocks.

Not far from the stock exchange,

is this building: 79 Delancey Street.

This building doesn’t look

like much now,

but then it’s been through

some rough times.

You see, this is the building

where the depression

actually started -

not Wall Street.

Most people think that the economy

was booming right up to the crash;

but it wasn’t.

Business had, in fact,

begun to turn down in mid-1929.

The crash made the recession worse.

And then came

a series of bank failures

in the South and Midwest.

But the recession

only became a really serious crisis,

when these failures

spread to New York,

and in particular to this building,

then the headquarters

of the Bank of United States.

The bank’s customers

had heard lots of rumors.

They panicked.

They tried to withdraw

all of their deposits in cash at once--

and that’s what a run on the bank is.

What would you do

if you went to the bank to withdraw

all your hard earned savings,

and the bank didn’t

have your money?

I don’t trust banks

because of that reason.

I’d be scared to death.

I’d be angry.

I’d be frustrated.

I’d be callin’ my lawyer.

That happened to my parents

and they had to do manual labor

for years.

If banks are gonna

lose your money,

you might as well just

make your own.

Why not make your own?

The ten dollar Carra Reserve note…

Nice, huh?

But why will everybody

take this dollar,

and not my money?

They’re both only paper, after all.

And, what exactly

is money anyways?

And what I came up with is this.

it all comes down to trust.

You see, on my money it says,

“In Carra We Trust.”

The people in my house

know that my word has value.

And it’s the same

with the world’s national currencies:

they only have value

because their governments

say they have value,

and in the case of the U.S. dollar,

at least,

most people on earth have faith

that our government and economy,

and therefore the dollar,

will continue to be strong.

But if something happens

to break that faith and trust,

the economy can crumble

and people become poor.

And that’s what happened

in the Great Depression.

So where did all that cash go?

Well, first off,

you might think that when you take

some cash into a bank

to deposit it,

that the bank takes your money

and sticks it into a vault somewhere

until you need it again.

But that’s not how it happens.

Hi. I’d like to make a withdrawal.

The bank uses our money-

they’re in business to do that.

They take a large part

of what we put in

and then lend it out to other people.

All right. I think we can do

a loan for about $600,000.

That’s great. Thank you.

The bank also invests in things

like money market accounts,

real estate, bonds, and mutual funds.

Our money is what

makes them money.

Thank you.

Of course they have to keep

some money on hand.

So that when I stop by

on my way to buy something

they can give me my cash.

But still, if all the bank’s customers

tried to withdraw

all their savings at once,

the bank just wouldn’t have enough

cash reserves to meet the demand.

And that’s exactly what happened--

all over the country--

and what turned an economic crisis

into the Great Depression.

In order to prevent such a run

you’ve gotta convince people

to stop asking for money

or you’ve got to find a way

to get more cash…

And that’s one of the main roles

of the Federal Reserve.

This is the Federal Reserve

in Washington, DC.

And I’ve been invited to talk